Market Commentary: In Search of the Middle Market's Second Act
Undeniably, private infrastructure as an asset class has grown quickly in the last decade. Since the Global Financial Crisis (“GFC”), infrastructure assets under management are estimated to have increased by more than six times to over $1tn in 2023.¹ As institutional portfolios seek diversification, stabilized cash-flows, lower volatility, and inflation participation, infrastructure managers offer a vital spoke in the wheel of a balanced allocation. Today’s modern-day giants of the industry grew from the ashes of the GFC and transformed the magnitude of capital raising from hundreds of millions to billions.2 Several earlier stage managers, who were once investing exclusively in the middle market, have grown into large asset managers (with fund sizes oftentimes doubling from one vintage to the next) and focused on infrastructure assets of scale (considered by some as a natural path of growth and by others a strategy drift). This accelerated growth in capital raising, fueled for many by the returns of a differentiated investment strategy in the middle market, has left capital allocators in a predicament: feed the beast or blaze a new trail?
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